Can your company trade before the winding-up hearing?
The period before a hearing needs urgent legal and solvency advice. Continuing operations can create risks beyond whether the next job earns a margin.
Corporate Recovery Partners
01 / 06
A future hearing date is being treated as permission to trade normally
A construction company has a winding-up application listed for next month. The director assumes it can trade normally until that date and considers selling a vehicle to pay a supplier. The company also needs materials for a new job. Those decisions require advice on solvency, the pending proceeding and the treatment of transactions if a winding-up order follows.
Collect the filed application, hearing details and any interim orders or appointment documents. Confirm the company’s current management and banking arrangements with advisers.
Do not assume the words application and order describe the same position. Equally, the absence of a final order should not be treated as blanket permission for every proposed transaction.
Prepare the costs and dependable receipts for work proposed during the pending period. Include existing liabilities and the consequences if the job cannot be completed.
ASIC’s guidance warns directors about incurring debts while insolvent. Obtain a current assessment rather than relying on the company having traded successfully before the application was filed.
Take proposed sales, transfers, security and payments to the lawyer before acting. Section 468 of the Corporations Act addresses relevant property dispositions in court winding up and includes court powers and exceptions.
The timing and application of those rules need specific advice. Do not attempt to avoid the issue by moving property to another company or paying through a director’s account.
Record what has been authorised, any conditions and who must approve further commitments. Keep a daily view of important receipts, payments and changes in the court case.
If funding or assumptions change, seek updated advice promptly. Staff should not be left to infer that normal purchasing continues simply because the hearing is several weeks away.
